Graduation Year
2019
Date of Submission
4-2019
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Professor Ananda Ganguly
Abstract
This study provides empirical evidence of a positive relationship between operating leverage and systematic risk of the U.S. airline industry. This paper contributes to the literature related to operating leverage by developing a method to estimate the degree of operating leverage using publicly available information on aircraft capacity and operating expenses of the publicly listed airlines. The results suggest that, holding other financial characteristics constant, a rise in operating leverage of an airline is associated with an increase in systematic risk as perceived by the investors. In order to achieve desirable levels of operating leverage, the airlines are advised to contemplate decisions on capacity adjustments and operating expenses management in reactions to changes in economic conditions.
Recommended Citation
Yao, Yujia, "Operating Leverage and Systematic Risk of the U.S. Airline Industry" (2019). CMC Senior Theses. 2148.
https://scholarship.claremont.edu/cmc_theses/2148
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
